All Forum Posts by: Einar Mykletun

Thank you all for your comments and feedback!

@Embert Madison jr - I am in agreement with you about paying down existing mortgages. I realize I did not mention this above, but I own 3 of the Vegas properties free and clear. This also then gives me leverage to refinance them for cash-out-loans to give me additional funds, if desired, to go after more properties. Overall, reducing my risk exposure is certainly a goal, which I try to balance with continued growth. Thanks for the feedback!

@Percy N. - Thanks for the info. I'm also interested in the quality of such properties/markets (like @Arkady S. asked) and I can message you directly as you said.

@Ken Teng - I know my portfolio is giving off that I'm focusing on speculation, but my intention was actually to have my cash flowing properties (Las Vegas) be the vehicle to permit me to take on more risks with a few larger properties (e.g. Orange County). I may have gone too far, and unloading one of the Orange County ones would go a ways to reducing some my risk.

@Anthony Wienke - Thank you for alerting me to the option of NNNs. This is not one that I had considered and I will educate myself about this avenue.

Hope everyone is having a nice Friday.

One more follow up question, to those who are willing to answer.

I'm a bit confused about how you look and evaluate the numbers for your own investments. Basically, do you evaluate the rental income against (1) the value of the home when you purchased it, (2) the outstanding mortgage or (3) the current estimated value of the home?

Example
Purchase price: $100,000 with 20% down payment (so loan of $80,000)
Monthly rent: $1,200
Estimated value 5 years later: $180,000 (e.g. some of my Vegas properties)

The 3 valuations outlined above then turn out to be:
(1) Monthly rent against purchase price = 1.2%
(2) Monthly rent against mortgage = 1.5%
(3) Monthly rent against estimated value = 0.67%

So the last value there (0.67%) looks paltry but when looked upon against the purchase price or mortgage, we are at least above the 1%.

Can you enlighten me on how you yourselves evaluate rental rate vs price?

Thanks,

Thank you everyone for your replies - much appreciated!

@Matt Hoyt - Thanks again for your feedback. If you are open to me reaching out to inquire more about such possibilities, then I'd like to continue a direct message conversation with you. I'll take you out for a coffee or bite to each too if you're around OC in the near future.

@Peter Assaad - Thanks for taking the time to write your response! My first 9 properties in Vegas (I since sold 2 of them) started off along the same formula/numbers as the ones you describe (I purchased them around $70-$100K and they rent(ed) for $950-$1,250), so I feel I've done alright setting up my cash flow with them. I have however taken a different approach with my current 2 higher priced properties in Orange County. That being said, if I could find another market where I could get 1% back then I'd be interested in exploring it and possibly purchasing multiple ones there, as opposed to another very expensive one here.

@Omar Merced - Thank you too for your response - did not mean to make you sad :) It looks like you are an agent in Nevada. You mentioned that my overall income numbers are quite miserable. What do you think about the income numbers for just the Vegas properties - are they in line with what you have seen with other investors there? They are basically valued around $1.3M and bringing in $2,700 after all expenses (budget ones too). Total income before expenses is $7,400/month.

@Ed S. and @Justin Stamper - thanks for sharing your concerns. Good for me to hear all the feedback I've received.

Thanks again everyone

 Thank you Matt. I have never ventured into 2-4's but am certainly interested. Do you have an sample numbers to share based on any recent deals you have been involved with or seen? Thanks

Hi Greg S. and thank you for your reply!

Yes, I do have a portfolio that looks more like that of a speculator. A few notes, in case they help:

1) I started out just building my portfolio in Las Vegas. Their total is valued around $1.3M and their cash flow is about $2,700

2) I then started purchasing those higher priced properties in Orange County, and their value is about $1.5M with a cash flow of negative $100

3) You mentioned that the 9 properties are valued at $3.7M but I think this is wrong, and the the more accurate value is $2.8M ($1.3M + $1.5). This still likely classifies me as more of a speculator than a cash flow investor, even though I think of myself (incorrectly ?) as the latter.

Thanks again for taking the time to reply.

Einar

Hello fellow BP members!

I wanted to ask for your advice regarding a decision I’m putting in front of myself: I’m trying to decide if my next investment property should be a play for appreciation or cash flow

I’ll try to give enough numbers and information to hopefully provide you with the ability to help provide your guidance.

My Current Portfolio

- 7 “cheaper” cash flowing properties (values ranging between $140-$210K) in Las Vegas, NV
- 2 “expensive” appreciation properties (values ranging between $650K-$820K) in Orange County, CA
- Monthly cash flow (for all 9 properties): $2,600

Other Relevant Information
- I’m currently working full time
- I have enough savings to last me more than 2 years (without a salary)

The Investments I’m Considering

Option 1
- SFH in Orange County, CA, for $650K with negative monthly cash flow of $300
- 30 year loan with 25% down payment of $187,500

Option 2
- SFH in Orlando, FL, for $170K with positive monthly cash flow of $270
- 30 year loan with 25% down payment of $42,500

Pros and Cons

Option 1

CONS:
(a) Negative monthly cash flow
(b) Large down payment
(c) Even larger exposure to market in Orange County, CA (would be 3 properties)
(d) I would likely have to sell one of my existing Las Vegas homes to come up with down payment (otherwise I’ll have too many mortgages to qualify for a new one)

PROS:

(a) Potential for larger appreciation (10% potential appreciation in 5 years of $650K vs. 10% appreciation of $170K), so I feel it is a better long term play
(b) I’m not sure if you guys typically give this much weight, but when I include the larger principle payment that would be made every month (e.g. around $800), it changes the monthly cash flow equation if one chooses to consider it, making it more attractive (long term)

Option 2

CONS:
(a) I feel it’s a weaker long term play (less appreciation potential)

PROS:
(a) Positive monthly cash flow out of the gates

General Notes
- I feel I can sustain the monthly cash flow in both cases
- I am only considering taking on the larger property (Option 1) because my other cash flowing properties provide me some buffer.
- However, I’m wary of pushing the limits too far and exposing myself to too much risk (debatable what is “too much”)

Conclusion
I'm looking for your advice/guidance about my above decision. I realize I can look at other opportunities than then two I have listed, but I feel I'll still come back to the debate about whether I want to go for a more expensive property with negative/less cash flow but better future appreciation possibilities, vs. a cheaper property with positive cash flow but less appreciation potential.

Thanks in advance and I'll try to fill in any missing info based on your feedback and questions.

Einar

Thank you both for reaching out to me. I'm excited for having joined BP after having listened to quite a few of the podcasts. I'm looking to learn about new markets where I can acquire more buy-and-hold properties and hope to meet like minded investors whom I can compare notes with and hopefully provide value to myself.

Thanks

Part time investor who’s been purchasing Buy and Hold properties since 2008 in Las Vegas, and more recently in Orange County, California. Working full time in a software job (email security).

Experience

I’ve completed 14 real estate transactions, all of which have been single family homes.

Real Estate Goals
Create a sufficiently large income stream to cover my living expenses and more.

Currently Seeking
New markets in which to acquire cash flowing properties.